Chapter 3: Zara: Fast Fashion from Savvy Systems. Medium quality “fast” fashion clothing at affordable prices. A Zara store in Manhattan. Why Study Zara?. To understand and appreciate : The counterintuitive and successful strategy of Zara The technology, which has made all of this possible.

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When a German wholesaler suddenly canceled a big lingerie order in 1975, Amancio Ortega thought his fledgling clothing company might go bankrupt. All his capital was tied up in the order. There were no other buyers. In desperation, he opened a shop near his factory in La Coruña, in the far northwest corner of Spain, and sold the goods himself. He called the shop Zara.

In the early 1960s Ortega became the manager of a local clothing shop, where he noticed that only a few wealthy residents could afford to buy the expensive clothes. Thus he started producing similar items at lower prices, purchasing cheaper fabric in Barcelona and cutting out pieces by hand using cardboard patterns. Ortega then sold his items to local shops; he used the profits to start his first factory in 1963 at the age of 27.

When Amanciao Ortega was 13 years old he worked as a delivery boy for a shirt maker who produced clothing for the rich. He later worked as a draper's and tailor's assistant. In seeing firsthand how costs mounted as garments moved from designers to factories to stores, Ortega learned early on the importance of delivering products directly to customers without using outside distributors. He would later employ such a strategy with great success at Zara, attempting to control all of the steps in textile production in order to cut costs and gain speed and flexibility. Read more: Amancio Ortega 1936— Biography - Early career, The zara phenomenon, Inditexhttp://www.referenceforbusiness.com/biography/M-R/Ortega-Amancio-1936.html#ixzz1bfL4MMA6

Inditex, one of the world’s largest fashion distribution groups, has more than 5,000 stores in 77 countries. In addition to Zara, the largest of its retail chains, Inditex has seven other formats: Pull &Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe.

Its unique management model, based on innovation and flexibility, and its vision of fashion – based on creativity and quality designs, together with the capacity to react quickly to market demands – has enabled it to enjoy rapid international expansion and an outstanding reaction to its various commercial concepts.

The Inditex Group is made up of more than 100 companies operating in textile design, manufacturing and distribution.

factory workers in Spain make an average of $1,650 a month, vs. $206 in China's Guandong Province

34% manufacturing is outsourced to Asia, and 14% to parts of Europe (mainly Italy and Turkey), those tend to be the more basic items. The high-fashion stuff, 49% of what it sells, is cut and finished in “proximity” (Spain, Portugal and Morocco), though some sewing is done by small local cooperatives. [ H&M 75% to Asia][[Check label]]

Marketing? (Budget)

0.3% vs. 3.5% of revenue

Batch Size?

Zara produces in small batches which creates a sense of scarcity with consumers. (Buy now or never)

Earlier this year, Inditex spent $324 million on a New York property slated to become its new global Zara flagship store. The purchase of the National Basketball Association's old store on Fifth Ave. is the country's most expensive real-estate transaction, measured in dollars per square foot.

In another recent deal also at 666 Fifth, Japanese clothing retailer Uniqlo agreed to pay $300 million over 15 years, in one of the most expensive leases ever in New York.

When the economy was at it’s worst, online retail sales were the one area that either grew or didn’t suffer as much from the downturn. Not having an e-commerce operation at this point is inexcusable for a global retailer.

"It basically follows the same model as our regular store expansion," Mr. Isla says of the online rollout. "For us to enter a new country has a very small cost because, with our twice-a-week delivery model we have few start-up costs. We don't need large logistical infrastructures, marketing departments or big central operations. The model allows us to have a light structure, and that applies to online as well."Read more: http://online.wsj.com/article/SB10001424053111903895904576546651628934210.html#ixzz1bZbsLbaD

Inditex spent €24 million over the past two years in preparation for its online launch in the U.S. and it has high hopes for online demand.

Some 200,000 people have downloaded the Zara application for Apple Inc.'s iPhone or iPad from the U.S., according to the company.Read more: http://online.wsj.com/article/SB10001424053111903895904576546651628934210.html#ixzz1bZdM1Bet